- FTX files lawsuit against Binance and CZ seeking $1.76 billion in allegedly fraudulent transfers from 2021
- The lawsuit stems from Binance’s exit from its 20% equity stake in FTX, which required payment in cryptocurrencies
- Caroline Ellison testified that Alameda Research borrowed over $1 billion from FTX customer deposits for the transaction
- FTX claims CZ’s 2022 tweets about FTX were intentionally misleading and contributed to the exchange’s collapse
- The legal action aims to recover funds for creditors who lost money in FTX’s bankruptcy
FTX Pursues Legal Action Against Binance
Two years after declaring bankruptcy, FTX has initiated legal proceedings against Binance Holdings Ltd. and former CEO Changpeng Zhao in Delaware Bankruptcy Court.
The lawsuit targets the recovery of $1.76 billion in allegedly fraudulent transfers made during a 2021 equity buyback deal.
Historical Partnership Gone Wrong
The relationship between the two cryptocurrency exchanges began in 2019 when Binance acquired a 20% equity stake in FTX.
The partnership deteriorated as FTX grew into a major competitor to Binance.
By mid-2021, the relationship had soured completely, leading to Zhao’s decision to exit his position in FTX.
The Controversial Buyback Deal
The repurchase agreement involved FTX buying back Binance’s stakes: approximately 20% in FTX International and 18.4% in FTX US.
The payment consisted of a combination of FTT tokens, BNB, and BUSD, valued at $1.76 billion at the time of the transaction.
Allegations of Fraudulent Activity
According to the lawsuit, the buyback transaction was rushed and potentially exploitative.
Former Alameda Research CEO Caroline Ellison’s testimony revealed that the firm lacked sufficient funds for the repurchase.
Ellison stated that Alameda was forced to borrow over $1 billion from FTX customer deposits to complete the transaction.
The Social Media Factor
The lawsuit specifically addresses Zhao’s 2022 tweet, which allegedly triggered massive customer withdrawals from FTX.
FTX claims these social media posts were "false, misleading, and fraudulent tweets that were maliciously calculated to destroy his rival FTX."
Current Status and Implications
Sam Bankman-Fried, FTX’s co-founder, has received a 25-year prison sentence for fraud and related charges.
Caroline Ellison is currently serving a two-year sentence for her role in defrauding investors.
The lawsuit seeks to void the 2021 transfer and recover funds for affected FTX creditors.
Binance has not yet responded to requests for comment on the lawsuit.
Previous Articles:
- FTX Sues Binance and CZ to Recover $1.8B in Allegedly Fraudulent Share Deal
- Cardano Founder Hoskinson Plans to Shape Crypto Policy Under Trump in 2025
- Blockchain Technology Emerges as Key Force in Democratizing AI Development
- Solana Surges to $214, Marking Highest Price Since 2021 Bull Run
- Trump’s Victory Sparks 21% Surge in Meme Coin Market, Pushing Cap to $66.72B
